Calcutta High Court (Appellete Side)
Kanoria Jute And Industries Limited & ... vs Bank Of India & Ors on 23 July, 2010
Author: Jyotirmay Bhattacharya
Bench: Jyotirmay Bhattacharya
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IN THE HIGH COURT AT CALCUTTA
Civil Revisional Jurisdiction
Appellate Side
Present:
The Hon'ble Justice Jyotirmay Bhattacharya
C.O. No. 2161 of 2010
KANORIA JUTE AND INDUSTRIES LIMITED & ANR.
VERSUS
BANK OF INDIA & ORS.
For the Petitioner : Mr. Saktinath Mukherjee
Mr. Saptangshu Basu
Mr. Soumen Sen
Mr. Jay Saha
Mr. B.K. Jain
For the O. P. Nos.2 to 5: Mr. Hirak Mitra
Mr. Debdutta Sen
Mr. S. Raychowdhury
Mr. P. Banerjee
Mr. A.K. Sil
Mr. A.K. Das
For the O.P. No. 1 : Mr. Avik Kr. Das
Judgment On : 23rd July, 2010.
Compromise is a product of an agreement between the parties for adjustment of their
dispute either wholly or in part and such compromise becomes a rule of the court when it gets a
seal of the court upon satisfaction as regards the legality and enforceability of the agreement or
compromise between the parties. Thus, settlement of terms of compromise on which the parties
want to settle their dispute are exclusively within the domain of the parties and the Court has no
role to play in settling the terms of settlement between the parties. Court cannot alter the terms
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of settlement either by imposing any additional term on the parties against their wishes or by
deleting any term from the terms of settlement on which the parties want to compromise their
suit, against their wishes. The only role which the Court has to play in recognizing compromise,
is to examine the legality and/or enforceability of the agreement and/or the terms of the
compromise between the parties and if it is found that the terms of the agreement and/or the
compromise is lawful then the Court can dispose of the suit either wholly or in part on the basis
of such compromise, after recording its satisfaction with regard to the legality of the agreement
and/or the terms of the compromise.
Keeping in mind the aforesaid principle which is enshrined in Order 23 Rule 3 of the Civil
Procedure Code, this Court will have to examine the legality of the order dated 2nd July, 2010
passed by the learned Chairperson, Debts Recovery Appellate Tribunal, Kolkata in appeal No. 43
of 2009, which is under challenge in this application under Article 227 of the Constitution of
India at the instance of the opposite party Nos. 1 and 4 who are the petitioners herein.
A question, as to applicability of the provision contained in the Civil
Procedure Code in a proceeding before the Tribunal under the Recovery of Debts
due to Bank and Financial Institution Act of 1993, was raised by Mr. Mitra,
learned Senior Counsel, appearing for the opposite party No.2 herein, by referring
to Section 22 of the said Act which provides that the Tribunal and the Appellate
Tribunal shall not be bound by the procedure laid down by the Civil Procedure
Code, 1908, but shall be guided by the principles of natural justice and subject
to other provisions of this Act and of any rules, the Tribunal and the appellate
tribunal shall have powers to regulate their own procedure including the places
at which they shall have their sitting.
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The Hon'ble Supreme court while considering the provision of Section 22 of
the said Act in the case of I.C.I.C.I. Ltd. vs. Grapco Industries Ltd. reported in
AIR (1999) SCC 1975 held that the said provision does not say that the tribunal
shall not be bound by the procedure laid by the Code of Civil Procedure, rather it
was held therein that the said provision indicates that the tribunal can travel
beyond the code of Civil Procedure and the only fetter on its power is the
principles of natural. Thus, this Court cannot hold that the principles contained
in the provision under Order 23 Rule 3 of the Civil Procedure Code cannot be
imported while deciding a proceeding before the Tribunal on compromise between
the parties.
Here is the case where admittedly the parties wanted to settle their dispute on
compromise and as such the joint petition of compromise, signed by the parties was filed before
the Debt Recovery Tribunal on 30th January, 2004. The relevant terms on which the parties
wanted to settle their dispute on compromise are as follows:
"I. The Applicant Bank shall receive and accept Rs.200 lacs as the OTS amount to be paid
in the following manner:
a) Rs.20 lacs to be deposited as upfront payment, which is already paid by the
defendants.
b) The balance of Rs.180 lacs be paid be the following installment:
Rs.30 lacs by 15th January, 2004 or latest by 31st January, 2004.
Balance Rs.50 lacs by 31st March, 2004.
c) The defendants shall also pay interest @ 11% p.a. (simple) on reducing balance
along with the installment amount.
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d) That upon payment of the entire compromise amount of Rs.200 lacs in installments
together with interest or upon receipt of the last instalment together with interest the cjharge of the
Appellant Bank shall stand satisfied and released.
e) That upon payment of the entire compromise amount of Rs.200 lacs plus interest by
the defendants the Bank will issue 'No Due Certificate' in favour of the defendants.
II. In the event the said settlement amount is not paid as per Clause I above or any
default is made in the payment of monthly instalment or the last instalment, the
settlement and concessions shall stand revoked and the entire claim of the Bank
in the OA No. 186 of 1995 i.e. Rs.18,15,59,607.40 plus interest as claimed by
applicant bank with costs and charges shall be revived and the certificate for the
whole claim less the amount already received shall be forthwith executable and
the applicant Bank shall be entitled to recover the said total claim of
Rs.18,15,59,607.40 with subsequent interest as claimed in the application with
costs and charges less the amount that may be realised in the mean time
through execution of the certificate in accordance with law.
8. That the above settlement is subject to the kind approval of the said Tribunal and be
recorded as may be thought fit and proper."
Though the compromise petition was filed before the Tribunal on 30th January, 2004 but
in fact the decree was passed on such compromise petition by the said Tribunal long thereafter
on 14th August, 2009 with the following order:
"1. That the O.A. 186 of 1995 be and the same is disposed of in terms of the compromise
specified in paragraph-7 of the compromise petition dated 30-01-2004 a photostat copy of which is
the part of this judgment as annexure thereto.
2. Since the due dates for payment in accordance with the terms of settlement
have been expired due to the delay in disposal of the compromise petition dated
30-01-2004, the compromising defendants Nos. 1 to 4 are directed also to pay
apart from the payment in accordance with the compromise the interest @ 11%
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per annum (simple) on the dues from the respective dates of payment in
accordance with the compromise till the date of realisation.
3. Under the circumstances the compromising defendants Nos. 1 to 4 are directed
to make the payment to the compromising applicant Bank of India, as specified
above, within fifteen days from the date of this judgment, failing which the
compromise in accordance with the term specified in the compromise petition
dated 30-01-2004 will be deemed as failed and the appellant Bank of India will
be entitled to file the petition before this Tribunal to proceed with the O.A. 186 of
1995 for the recovery of the dues as claimed in the said O.A. After receiving the
payment, in accordance with the compromise, as directed above, the
compromising applicant Bank of India will issue 'No Due Certificate' to the
compromising defendants and thereafter the charges on the properties of the
compromising defendants, relating to the claim made in the O.A. No. 186 of
1995 will be discharged.
4. Under the circumstances no order as to cost.
Let the certificate be prepared and put up on 26-08-2009 for seal and signature.
Copy of this judgment be given/sent to the applicant Bank and also the defendants."
The bank, namely, the opposite party No.1 herein and the opposite party
No.2 company being the assignee of the said decree challenged the said
compromise decree before the Debt Recovery Appellate Tribunal at Kolkata.
A question was raised with regard to maintainability of the said appeal as according to the
petitioner, neither the Bank which admittedly assigned the said decree in favour of the opposite
party No.2 herein (assignee company) nor the opposite party No.2 namely the assignee company,
which was neither a party to the compromise nor took any step for its impleadment as party in
the said proceeding before the Tribunal under Order 22 Rule 10 of the Code of Civil Procedure
after the decree was assigned, were competent to maintain the said appeal. The learned Appeal
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Court without deciding the said objection regarding the locus of the appellants to maintain the
said appeal, decided the said appeal on merit. As a matter of fact, while deciding such appeal,
the learned Appellate Tribunal even did not consider the grounds made out by the said appellants
in the memorandum of appeal for challenging the propriety and/or legality of the order of the
Tribunal.
If the grounds which were made out by the appellants in their memorandum of appeal are
taken into consideration, it will appear that in fact the order of the Tribunal was challenged
primarily on the ground that the very basis and foundation of the terms of settlement and the
compromise petition dated 30th January, 2004 had gone and/or stood frustrated and/or
extinguished because of long passage of time between the date of its submission and the ultimate
date on which the order was passed on compromise. According to the appellant, on the date
when order was passed on compromise on 14.08.2009, the terms of the said compromise because
incapable of implementation as in terms of the said compromise petition the ultimate date fixed
for payment of the last installment expired on 31st March, 2004. Relevant grounds on which such
compromise decree was challenged in the said appeal are set out hereunder:
"VIII) For that the said Terms of Settlement and petition dated January 30, 2004 were
entered into the same were product of consent and agreement between the parties thereto, which
none except them can or have the right to change and alter the same, the said order changes and
alters which is not permissible without the consent and agreement between the concerned parties.
IX) For having regard to the fact that the said Terms of Settlement and petition dated
January 30, 2004 were terminated and determined by efflux of time limited thereby, that is to say,
on the expiry of March 31, 2004, the Learned Tribunal has not jurisdiction and is not competent to
resuscitate the same and erred in so doing.
X) For that by the act and conduct the respondent No.1 gave go-bye and abandoned the said
Terms of Settlement and petition dated January 30, 2004, the Learned Tribunal should not have make the said order.
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XI) For that the said petition dated July30, 2004 containing the Terms of Settlement were not given effect to for the last more than five years by the respondent No.1 and/or respondents, the Learned Tribunal erred in making the said order."
Mr. Mitra submitted that apart from the aforesaid grounds the appellants also challenged the said decree on merit as will appear from ground No.7 which relates to willful default on the part of the petitioner to fulfil the terms of the settlement and as a result of such default, the consequences for such default as provided in the said terms of settlement got attracted.
Mr. Mitra wanted to impress upon this court that concession given by a lawyer on erroneous point of law does not bind his clients. According to him, the appeal court rightly considered the appeal on its merit without taking note of the concession given by the lawyer which was not binding upon the appellants. He wanted to mean that the grounds of challenge as mentioned in Ground Nos. VIII, IX, X and XI of the Memo of Appeal were set out therein due to erroneous advice of the lawyer and as such the appellate forum did not commit any illegality in ignoring these grounds of Appeal.
Mr. Mitra, cited the following decisions in support is his submission that an erroneous concession on law given by a lawyer does not bind his client:
1. Maharani Beni Pershad Koeri vs. Dudh Nath Roy, reported in 4 CWN 274;
2. Moran Mar Basselios Catholicos & Anr. vs. Most Rev. Mar Poulose Athanasius & Ors., reported in AIR 1954 SC 526;
3. Ram Ratan Lal vs. Kashinath Tewari & Ors., reported in AIR 1966 Patna 235.
Though principally this Court does not want to join on such issue but at the same time this court wants to make it clear that this is not a case where any erroneous concession was given by the lawyer of the opposite party Nos. 1 and 2 in course of hearing of the appeal. In fact, the entire challenge was based on the 8 Ground Nos. VIII, IX, X and XI mentioned in the memorandum of appeal which cannot be regarded as a concession given by the lawyer on behalf of the client.
If those grounds are taken into consideration, this court has no hesitation to hold that the bank practically abandoned the said compromise and in fact the bank had no intention to get the said proceeding disposed of on 14th August, 2004 on the basis of the said compromise petition which they filed as back as on 30th January, 2004 because of the simple reason that the terms of settlement as mentioned in the compromise petition became incapable of implementation because of passage of time.
Since the compromise is a product of an agreement and such compromise becomes a rule of law only when court recognizes such compromise as legal and puts a seal on it, any of the parties can resile from the agreement before the said compromise is made a rule of the court. As such it is the duty of the Court and/or Tribunal to ascertain even at the time of passing of the ultimate decree on compromise as to whether the parties are still willing to get their dispute settled on the basis of such compromise or not? In my view, the said duty was not discharged by the learned Tribunal in the instant case. When it was found that the terms of compromise could not be given effect to without modification of the terms of the compromise, the learned Tribunal, instead of disposing of the proceeding on compromise in modified form, ought to have enquired from the parties as to whether they still wanted to the get their dispute settled by altering the schedule of payment or not or in any other modified form. Thus this Court is of the view that notwithstanding the provision contained in paragraph No.8 of the said compromise petition, the tribunal had no jurisdiction to impose additional 9 condition on the parties by altering the terms of settlement without taking their consent.
Even this court cannot accept the submission of the Mr. Mukherjee, learned Senior Counsel, appearing for the petitioner who submitted that imposition of additional condition by the Tribunal for mitigating justice to the parties in such altered situation cannot be held to be illegal in view of clause 8 of the terms of settlement which, according to Mr. Mukherjee, authorized the Tribunal to alter the terms of compromise for giving ultimate shape to the said compromise without disturbing the basic structure of the compromise. In my view, the said clause 8 of the compromise petition simply authorised the Tribunal to consider the legality and/or enforceability of the terms agreed between the parties before putting a seal on such compromise and nothing more and nothing less.
Thus this court holds that the decree which was passed by the tribunal on the basis of such compromise petition is illegal and such decree cannot be retained on record. The conclusion of the Appellate Tribunal upto this, is accepted by this court, for the reasons as aforesaid, without however approving the finding on which such conclusion was drawn by the Appellate Tribunal.
This court also cannot accept the submission Mr. Mitra, learned Senior Counsel, who submitted that the default clause as contained in clause 2 of the terms of compromise was attracted on the failure of the petitioner herein to deposit the agreed amount within the stipulated period as per the said compromise petition. This court holds that the opposite party Nos. 1 and 2 cannot take both hot and cold at the same time. Once they take a stand that the compromise was practically abandoned and/or frustrated due to passage of time and/or change of situation 10 making the terms of compromise unenforceable and/or incapable of implementation, they cannot claim any benefit out of any of the terms of compromise even if it was favourable to them.
As such this court holds that the bank is not entitled to get any benefit from any of the terms of the said terms of settlement. This Court thus holds that while setting aside the order passed by the learned Presiding Officer of the Debt Recovery Tribunal-1 Kolkata on 14th August, 2009, the learned Appellate Tribunal committed an illegality by directing issuance of recovery certificate in terms of clause 7(2) of the terms of settlement dated 30th January, 2004 in favour of the second appellant namely, Asset Reconstruction Company (India) Ltd.
Accordingly that part of the direction passed by the Appellate Tribunal is set aside in view of the discussion as made hereinabove. The Debt Recovery Tribunal-1 Kolkata is now required to consider the application being O.A. No. 186 of 1995 under Section 19 of the said Act on its own merit in accordance with law.
Before parting with, this Court also wants to make it clear that since the decree is set aside the opposite party No.2 herein cannot claim any benefit of the alleged assignment of the said decree. The said opposite party No.2 thus cannot be regarded as an assignee of the said compromise decree and as such the said company cannot be impleaded as assignee of the decree under order 22 rule 10 of the Civil Procedure Code in the said proceeding. Maintainability of the Appeal:
Since the bank was one of the appellants before the learned Appellate Tribunal, this court holds that the said appeal at the instance of the bank cannot be held to be not maintainable even assuming that the appellant no. 2 namely opposite party No.2 had no locus to maintain the said appeal. Of course, this court cannot hold that the said opposite party No.2 had no locus to maintain the said appeal at the material time as when the appeal was filed, the decree passed 11 by the Tribunal was in operation and as such the assignee of the decree, whose interest was adversely affected by the decree passed by the learned Tribunal, had the right to maintain the said appeal before the Appellate Tribunal with the leave of the Appellate Tribunal and grant of such leave can be presumed as the said appellant was allowed to proceed with the same along with the Bank. As such this court holds that the appeal at the instance of both the appellants, was maintainable.
The revisional application is thus disposed of with the above observation.
Urgent xerox certified copy of this order, if applied for, be given to the parties as expeditiously as possible.
(Jyotirmay Bhattacharya, J.)